If I had a nickel for every time I heard the word “A.I.” this year I would have retired by now. An active observer of stock market activity would notice an absolutely fascinating phenomenon happening before our eyes. Every time there is a hint that Artificial Intelligence or “A.I.” may find some use in a particular industry, the stocks of the companies in that industry take a tumble. “Shoot first and ask questions later” seems to be the mindset of stock traders. Concerns about future employment levels are rapidly increasing, as one industry after another is finding potential uses for A.I. to replace or at least significantly reduce the amount of hours needed by “H.I.” or “Human Intelligence.” A.I. is being touted as the panacea for all things. Have a complicated question? Ask A.I. Want to improve the quality or change the background of a picture or video you took? Ask A.I. Need to quickly translate and/or summarize a complicated medical, legal or technical publication? Ask A.I. Want to book travel, a night on the town, or create software to run your sales team? Ask A.I.  Clearly A.I. has incredible potential to change our lives, but the unknowns are more than a little frightening. So, what does all of this mean for us going forward and what does it mean for investors?

To try and answer these questions, following the notion that “if you can’t beat ‘em, join ‘em,” I asked A.I. the following: “In what ways will A.I. change the lives of humans in the future?” The answer I received is basically what one would expect based on old fashion “H.I.”, only faster. A.I. is expected (at this point) to be able to, “automate routine labour, accelerate medical breakthroughs, and hyper-personalize daily experiences.” The next line I found rather enlightening (emphasis is mine): “While it promises profound convenience, economic growth and an age of abundance, it also introduces challenges like job displacement, data privacy risks and deep fakes.” In other words, A.I. is a faster way of doing many things we are already doing, both the positive (medical breakthroughs) and the negative (breach of privacy and more sophisticated fraud). So, if it wasn’t bad enough to get fake calls or texts from overseas crooks pretending to be your credit card provider and trying to con you into providing personal information or money, with the introduction of A.I. “you ain’t seen nothing yet!”

For investors, the question is what impact will A.I. have on the actual investments and the way we invest? According to A.I. itself, investments will be impacted by the technology companies that make A.I. chips and software, as sales should increase. Businesses that incorporate A.I. to find efficiencies and reduce labour costs (such as the aforementioned data entry) will increase their profitability. Finally, new products will arise like in the medical field, which were previously difficult to create due to technological difficulties. As for investors, A.I. itself warns: (a) “Watch out for the risks such as Hype bubbles” – created by overenthusiastic human investors chasing returns, (b) “Better tools” – using A.I. to read and simplify financial reports or to spot market trends in a fancier version of what we used to call “Coles Notes” (c) “Automated portfolios” – to rebalance portfolios based on a set of preset rules (d) “Faster Trading” – as computers can move faster than humans.” Does any of this come as a shock? Not really. The computer age started a long time ago and this improvement seems to be a hyper version of everything we have seen before. As far as applying a formulaic approach to investing, I can give you countless examples of investment decisions that were made based on reacting too quickly to news stories, that with hindsight ended up being terrible decisions by the investor. Reactions to wars, economic collapse, epidemics (remember that Covid thing?), company specific headlines – almost always turn out to be overreactions. Now if somebody could only invent an A.I. crystal ball…

For those of us who remember the hype around the advent of the internet, let’s put this A.I. thing in perspective. Will A.I. change the way we do things? Absolutely. Will it change the world as we know it and will everything that is old be thrown out like the proverbial baby with the bathwater? A resounding “No!” As the great King Solomon, the wisest of all men, said, “There is nothing new under the sun.” The human emotions of fear and greed remain the same, as is the case with most of human behaviour. The cleverest amongst us will figure out how to harness this latest sophisticated tool to improve our lives and unfortunately, the worst amongst us will use this same tool to take advantage of others.

Bottom line

The hype around A.I. is incredible and is eerily reminiscent of the hype that surrounded the internet in its early stages during the late 90’s and early 2000’s. Many of us remember the absolute panic to buy into this new technology and then the absolute panic to sell once the “bubble” burst. There are many exciting possibilities with A.I. but caveat emptor still applies, as just as many negativities will undoubtedly result from its use. If you want to discuss how A.I. may impact your portfolio, or your retirement or other wealth planning, contact us and let’s schedule a time to chat!